Can NRIs Buy Unlisted Shares in India? (2026)
Reviewed by Kanishk Dev Bangia, NISM Series XV Certified Research Analyst
Last Updated: June 2026 | Reg. No: NISM-202300182946
I get this question regularly, and it deserves a proper answer - not just a quick yes or no. The short version is yes, NRIs can generally invest in unlisted Indian shares. But the longer version is where it gets important, because the whole path goes through FEMA, the RBI rules, your NRI demat account setup, and the tax treatment which is different in a meaningful way from what a resident Indian investor faces.
So, if you are an NRI looking at the unlisted market and thinking, “am I even allowed?” then yes, in most cases you are. Still, “eligible” is not the same as “ready to invest”. This guide explains the framework step by step, in a clean way, and it also shows where you really should take professional help before you put money in.
1. The Legal Basis: Why FEMA Governs This
When an NRI puts money into India, the governing law isn’t the Income Tax Act, it’s the Foreign Exchange Management Act, FEMA, which is administered by the RBI. FEMA ends up deciding whether funds can enter India, what kind of assets they can go into, and just as critically, whether profits can go back out again.
Unlisted shares are generally slotted under the Foreign Direct Investment (FDI) framework for most purposes - so they come with sectoral caps, pricing rules, and various reporting duties that resident Indians usually don’t face in the same way. The SEBI side also overlaps in this area, especially when people talk about what counts as a genuine secondary market deal, and how demat holdings are handled day to day.
Lesson: For NRI investment in unlisted shares, you should treat FEMA/RBI as the primary spine of the whole arrangement, not just SEBI. This is the foundational fact that shapes everything else in this guide.
2. Two Routes: Repatriable vs. Non-Repatriable
This is the most important distinction for any NRI investor to grasp.
Repatriable basis means you invest using funds from outside India — via inward remittance or your NRE account — and when you exit, the proceeds including gains can be sent back to your overseas account. This is typically used for investments that qualify under the automatic route of FDI.
Non-Repatriable basis means you invest from your NRO account, which generally holds income earned within India (rent, dividends, salary from Indian work). The principal and gains can be reinvested in India, but repatriation abroad is subject to annual limits set by the RBI. Those limits are subject to revision — verify the current figures directly with your bank and the RBI.
For most NRIs, the Repatriable route is more attractive because it preserves the ability to bring returns home. But it also requires the investment to comply with FDI norms, including sector eligibility and applicable pricing guidelines.
Lesson: Before you invest, know which route applies — it depends on which account the funds come from, the sector the company operates in, and your own residency and tax status.
3. Your NRI Demat Account: Set This Up First
To hold unlisted shares in India, you need a demat account. As an NRI, you cannot use a standard resident Indian demat account — you need an NRI demat account, linked either to your NRE account (for repatriable holdings) or your NRO account (for non-repatriable holdings).
NSDL and CDSL — the two depositories — support NRI demat accounts through SEBI-registered intermediaries who can open the right account type and ensure the linkage is correctly structured.
Get this sorted before you identify a deal. NRI demat account opening takes longer than for resident Indians — it often requires additional KYC documents, a FATCA declaration if you’re US-based, and bank linkage verification. Don’t wait until you’ve found a live opportunity. If you already hold an NRI demat account for listed equities, confirm with your intermediary whether it is also configured for unlisted shares.
For a primer on what you’re actually buying, read our guide on what are unlisted shares.
Lesson: Your NRI demat account is the infrastructure layer. Without it being correctly arranged and linked, no proper unlisted share transaction can take place.
4. Sectoral Caps and Pricing Compliance
Under the FDI framework, not every sector is treated the same in terms of foreign capital. Some sectors come with caps - an NRI on a repatriable basis cannot pick up more than the allowed percentage of a company’s equity. Also, a couple of sectors don’t follow the automatic lane and instead need government permission.
I won’t list specific caps here because they keep moving, and quoting a stale figure is honestly worse than saying nothing. What you should do is this: confirm the sector the company operates in, then cross-check the relevant FDI cap using the RBI’s latest Master Directions, or get a qualified CA involved before you commit.
The second piece is pricing. FDI transactions generally require that shares are not acquired below a fair value determined by a SEBI-registered intermediary using an accepted methodology. This ensures capital isn’t transferred at artificially low valuations. As an NRI buyer on the secondary market, confirming pricing compliance requires professional guidance.
For the mechanics of how unlisted share transactions work, see our guide on how to buy shares of unlisted companies.
Lesson: Two checks before any NRI investment - sector eligibility under FDI, and pricing compliance. Both require professional verification.
5. Reporting Obligations
This is the point where NRI investors always underestimate the effort involved. An investment on repatriable basis would generally require reporting with the Reserve Bank of India. The forms & timelines are defined in RBI Master Directions – Please check with your bank / CA for prevailing requirements before transacting.
Reporting is compulsory and is the manner in which RBI tracks inbound FDI. Non-compliance may lead to complications at the time of exit including problems in repatriating proceeds. If the transaction was properly structured through your bank, they will often assist with filing. At exit: If the company goes public (IPO), make sure that the proceeds return through the same repatriation route you made your initial investment.
Lesson: A clean entry with proper reporting makes exit far simpler — and repatriation possible.
6. Tax Treatment for NRIs: What’s Different
As per the Income Tax Act, gains arising from Indian assets are taxable for NRI investors, but they are treated a little differently from residents. I will not talk about the current rates as these keep changing with every Union Budget.
If you hold unlisted shares for less than 24 months, the capital gains are generally considered short-term. If the shares are held for 24 months or more they will be treated as long-term and may be eligible for indexation benefits. This is important because long rates and short rates are different rates.
For NRIs, TDS is deducted at the time of payment. Usually, the buyer has to deduct TDS on capital gains and pay the net amount to you. This is different from resident Indians who deal with tax through self-assessment. If TDS is deducted at a higher rate than your actual liability, you can get a refund by filing an Indian income tax return – but it takes time and a CA.
India also has Double Taxation Avoidance Agreements (DTAAs) with many countries that can reduce your Indian tax liability. You need country-specific advice to determine whether a DTAA applies and how to claim it.
For a detailed capital gains breakdown, see our guide on tax on unlisted shares.
Lesson: NRIs face TDS at source on gains, and may need to file an Indian tax return to claim refunds or DTAA benefits. Factor this into your return calculations before investing.
Frequently Asked Questions
Q: Can NRIs invest in pre-IPO shares of Indian companies?
Generally yes — pre-IPO shares are a subset of unlisted shares, and the same FEMA/RBI framework applies. Confirm with your intermediary how holdings will transition to the listed format when the company IPOs, and what the lock-in implications are.
Q: Is there a limit on how much an NRI can invest?
Individual investment amounts aren’t capped by a simple absolute number, but sectoral FDI caps limit what percentage of a company’s equity NRIs and other foreign investors can hold collectively. Repatriation from the NRO account has annual RBI-set limits. Verify both with a CA before transacting.
Q: Do NRIs need prior RBI approval to buy unlisted shares?
For sectors under the automatic FDI route, no prior approval is required — but post-investment reporting is mandatory. For sectors requiring government approval, the process is different. Know which route applies before you commit.
Q: What happens if the company does an IPO?
Holdings remain in the NRI’s demat account and convert to listed equity. Tax treatment at the point of sale will be governed by listed equity rules at that time. Confirm lock-in periods and post-listing tax treatment with a CA in advance.
Disclaimer:
This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.
